12CA1330 Hasan v.

S Colo Tea Party 07-03-2013 COLORADO COURT OF APPEALS DATE FILED: July 3, 2013 ______________________________________________________________________________ Court of Appeals No. 12CA1330 Office of Administrative Courts No. 2010-0026 ______________________________________________________________________________ Malik Hasan, Petitioner-Appellee, v. Southern Colorado Tea Party, Respondent-Appellant. ______________________________________________________________________________ ORDER AFFIRMED Division IV Opinion by JUDGE WEBB Hawthorne and Richman, JJ., concur NOT PUBLISHED PURSUANT TO C.A.R. 35(f) Announced July 3, 2013 ______________________________________________________________________________ Heizer Paul Grueskin LLP, Mark G. Grueskin, Denver, Colorado, for PetitionerAppellee The Law Office of Alexander Hornaday, LLC, Alexander Hornaday, Denver, Colorado, for Respondent-Appellant

Southern Colorado Tea Party (SCTP) appeals the order of an administrative law judge (ALJ) imposing a $10,000 civil penalty for violating campaign finance laws. We affirm. Malik Hasan filed a complaint against SCTP alleging that it: failed to register as a political committee, as defined in Colo. Const., art. XXVIII, § 12(a); accepted anonymous contributions in violation of Secretary of State Rule 3.9a., 8 Code Colo. Regs. 1505-6; and failed to report contributions and expenditures under the Fair Campaign Practices Act (FCPA), section 1-45-108(1), C.R.S. 2012. Hasan subpoenaed SCTP’s chairman, Sheldon Bloedorn, and its treasurer for depositions, but neither appeared; he also subpoenaed their attendance at the hearing, again without success; and no representative of SCTP entered an appearance or attended the hearing. Ultimately, Hasan moved for default, which the ALJ granted. In entering the default judgment, the ALJ found that SCTP was “deemed to have admitted all allegations in the complaint,” including the following facts: • SCTP “operates primarily to endorse, support, and elect candidates for public office who share its concerns.”
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• SCTP’s “major purpose is to support the nomination or election, or both, of selected candidates for public office.” • SCTP “accepted or made contributions or expenditures in excess of $200.” • “Most of [SCTP’s] contributions have been given by anonymous donors.” • SCTP “has not registered with the Colorado Secretary of State as a political committee . . . .” • SCTP failed to file contribution and disclosure reports under section 1-45-108(2), C.R.S. 2012. The ALJ set a hearing to assess penalties for the campaign finance law violations and to award attorney fees for “failure of [SCTP’s] officers to comply with the subpoenas.” Counsel entered an appearance for SCTP and moved to set aside the default. SCTP argued, among other things, that the ALJ should consider a meritorious defense -- SCTP was not a political committee because its major purpose was not to support the election of candidates -- to the finding that SCTP had violated campaign finance laws. The ALJ denied the motion, finding that SCTP had not shown excusable neglect and that “setting aside
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default would be inconsistent with considerations of equity.” The ALJ declined to address SCTP’s political committee argument, explaining: Whether the endorsement of candidates was a major purpose of the SCTP is something that could only really be determined at a hearing. But, of course, SCTP chose not to show up for the two scheduled hearings. SCTP did not appeal denial of this motion. The ALJ held the hearing on penalties, at which SCTP was represented. The ALJ assessed $9,723.30 in attorney fees, “with Mr. Bloedorn’s share limited to $2,528,” which SCTP does not appeal, and imposed the $10,000 civil penalty for campaign finance law violations that is before us, which would be “forgiven” if the attorney fees were paid within sixty days. On appeal, SCTP concedes that the attorney fees were not paid; it “did not and does not ask this court to overturn the default judgment;” and it has “accepted that the default judgment along with the award of attorney’s fees is a sanction for and a consequence of its initial failure to participate in the judicial process.”

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I. Constitutional Challenges to the Definition of “Political Committee” Are Barred SCTP first contends the definition of “political committee” in the Colorado Constitution is unconstitutional, both on its face and as applied, because it does not contain language requiring that such an organization’s major purpose be supporting the election of a candidate. For the following three reasons, SCTP is barred from asserting these contentions. First, SCTP could have raised its as applied challenge to the definition of political committee in defending against the alleged campaign finance law violations, but did not do so. A default judgment “precludes the relitigation, not only of the issues which were actually litigated . . . but also of all grounds of claim and defense which might have been properly litigated in the first action but were not litigated or decided.” Ortega v. Bd. of Cnty. Comm’rs, 683 P.2d 819, 821 (Colo. App. 1984) (internal citation omitted); see also Aspen Plaza Co. v. Garcia, 691 P.2d 763, 764 (Colo. App. 1984) (“Judgment by default is res judicata as to those matters pled and determined.”).

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Second, even if the default judgment does not preclude the facial challenge because administrative agencies lack jurisdiction to decide such challenges, see Horrell v. Department of Administration, 861 P.2d 1194, 1198 & n.4 (Colo. 1993), SCTP could have raised a facial challenge to the definition of political committee in an appeal of the order denying its motion to set aside the default judgment. See Pepper v. Indus. Claim Appeals Office, 131 P.3d 1137, 1142 (Colo. App. 2005) (Carparelli, J., dissenting) (“[a] claimant may raise a facial challenge for the first time on review of an agency action.”); Schenck v. Van Ningen, 719 P.2d 1100 (Colo. App. 1986) (order denying a motion for default judgment is an appealable order);. However, SCTP did not appeal this order. Third, both constitutional challenges relate to SCTP’s liability under the campaign finance laws. But the current appeal involves only the $10,000 civil penalty. As to SCTP’s liability, the default judgment “constitute[d] an admission . . . of the material allegations contained in the complaint,” Pinkstaff v. Black & Decker (U.S.) Inc., 211 P.3d 698, 703 (Colo. 2009), which included that SCTP’s major purpose was to support candidates. Under such circumstances, “the principle of judicial restraint requires us to ‘avoid reaching
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constitutional questions in advance of the necessity of deciding them.’” Developmental Pathways v. Ritter, 178 P.3d 524, 535 (Colo. 2008) (quoting Lyng v. Nw. Indian Cemetery Protective Ass’n, 485 U.S. 439, 445 (1988)); Saint John’s Church in Wilderness v. Scott, 2012 COA 72, ¶ 38, 296 P.3d 273, 281. II. The Jurisdictional Challenge Is Barred SCTP next contends the ALJ lacked jurisdiction to impose the $10,000 civil penalty because SCTP was not a political committee. For the following reasons, this argument is also barred. SCTP concedes that under Colo. Const. art. XXVIII, § 9(2)(a), the ALJ had jurisdiction to hear the violations alleged in the complaint. However, it argues that after receiving evidence during the penalty hearing, “the ALJ should have determined that SCTP did not have the major purpose of supporting candidates and, therefore, was not a political committee.” SCTP does not cite to where it raised lack of jurisdiction before the ALJ. During the penalty hearing, SCTP’s counsel conceded: “I’m fully cognizant of the fact that we are not here to reconsider whether it was a major purpose.” Nevertheless, the subject matter jurisdiction of an agency generally may be challenged for the first
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time on appeal. See Hamilton v. City & Cnty. of Denver, 176 Colo. 6, 11, 490 P.2d 1289, 1292 (1971). However, where an initial tribunal errs in exercising jurisdiction, “and that error could have been corrected on direct appeal, the doctrines of claim and issue preclusion bar any later attack on the . . . original finding of jurisdiction.” In re Marriage of Mallon, 956 P.2d 642, 645 (Colo. App. 1998); see also State Comp. Ins. Fund v. Luna, 156 Colo. 106, 110, 397 P.2d 231, 233-34 (1964) (where jurisdiction depends upon existence of factual circumstances and tribunal finds that such circumstances exist, that determination is not subject to collateral attack, although it can be reviewed on direct appeal). Here, SCTP could have challenged the ALJ’s jurisdiction in a direct appeal from the order denying its motion to set aside the default judgment on the basis that it was not a political committee. By not doing so, the default judgment constituted an admission that SCTP’s major purpose was to support candidates, thus constituting a political committee. SCTP is now barred from asserting lack of jurisdiction on that basis.

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III. The $10,000 Civil Penalty Was Not Manifestly Excessive Finally, SCTP contends the $10,000 civil penalty was an abuse of discretion because it manifestly exceeded the amount needed to protect the public.1 The record does not show an abuse of discretion. When an administrative agency is granted statutory authority to impose a sanction, a reviewing court may not overturn the sanction absent an abuse of discretion. Sherritt v. Rocky Mountain Fire Dist., 205 P.3d 544, 546 (Colo. App. 2009). Nor may the reviewing court “substitute its judgment for that of the agency, but must uphold the agency sanction unless,” as relevant here, it “is manifestly excessive in relation to the needs of the public.” Id. at 546-47 (internal citation omitted). SCTP argues that the $10,000 fine was manifestly excessive because it was “more than SCTP took in [in] an entire year;” “ten times the largest amount ever in SCTP’s account during 2010;” and “twenty-five times the amount contributed to candidates.” It also argues that the purposes of FCPA were satisfied because “the public
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To the extent SCTP argues the penalty was an abuse of discretion because SCTP does not constitute a political committee, we have resolved that argument against SCTP above.
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was still informed of SCTP’s contributions . . . by the recipient candidates.” These arguments fail for the following reasons. During the hearing, Hasan presented evidence that SCTP’s violations -- which included nine violations for failing to file disclosure reports and one violation for failing to deliver anonymous contributions -- could have resulted in $90,000 in penalties. Each violation carried a $50 per day fine, amounting to a $9,000 penalty for each violation. Thus, when compared to the number of violations by SCTP, the $10,000 penalty was not excessive. Nor is this penalty excessive in relation to the needs of the public because, as SCTP argues, reports made by recipient candidates informed the public of the sources of their contributions. SCTP does not cite to any evidence of candidate disclosures. See C.A.R. 28(a)(4) (appellate brief must set forth “parts of the record relied on”). In any event, as explained in Colorado Common Cause v. Meyer, 758 P.2d 153, 162 (Colo. 1988), the FCPA established “a variety of filing and reporting requirements for contributions . . . to or on behalf of a political candidate or issue.” Some of these requirements are directed “solely at individuals seeking public
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office,” others “are directed solely to political committees,” and some are “expressly directed to individual candidates and political committees.” Id. at 162-63. But these multiple and sometimes overlapping requirements further “the promotion of public confidence in government through a more informed electorate.” Id. at 162. Thus, the needs of the public were not met merely because the recipient candidates should have filed reports that included SCTP’s contributions. See Colo. Citizens for Ethics in Gov't v. Comm. for the Am. Dream, 187 P.3d 1207, 1217-19 (Colo. App. 2008) (rejecting the defendant’s “assertion that it satisfied the . . . reporting requirements through its other reports . . . [a]lthough much of the contents overlap”). Accordingly, because the $10,000 civil penalty was not manifestly excessive, the ALJ acted within his discretion. The order is affirmed. JUDGE HAWTHORNE and JUDGE RICHMAN concur.

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STATE OF COLORADO 2 East 14th Avenue Denver, CO 80203 (720) 625-5000 CHRIS RYAN
CLERK OF THE COURT

PAULINE BROCK
CHIEF DEPUTY CLERK

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BY THE COURT:

Janice B. Davidson Chief Judge

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